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IMPACT – MEDIUM
U.K. employers should plan for increased challenges in recruiting high-skilled workers from outside the EU, after official Home Office figures recorded a consecutive six-month pattern of Tier 2 (General) visa quotas being met. Hundreds of employer applications have been refused over the last half year based on the quota provisions that were originally set in 2010 and, until December 2017, provided ample visas to meet employer demand. It now appears that quotas will be routinely exceeded and employers should consider the situation as a long-term trend and not just a system glitch.
Some of the contributing factors to the skills shortages are a tight labor market and the “Brexodus” of talent from the U.K. as European Union migrants opt to leave the U.K. ahead of Brexit, as well as systemic problems in the way the U.K. trains its labor force. The government is facing pressure from specific sectors to ease Tier 2 quota restrictions, in particular to lift the quotas on doctors from outside the EU (who are essential to the operation of the National Health Service and account for one third of all Restricted Certificates of Sponsorship, or RCOs, issued). However, Prime Minister Theresa May recently rejected this proposal, and it is unclear whether the government will spend resources to make piecemeal adjustments to the system, given that the entire U.K. immigration system will be overhauled shortly due to Brexit. Further, the Conservative Party’s political commitment to reducing net migration to the tens of thousands remains firmly in place, despite opposition from the business community, suggesting that quotas, however unpalatable, are here to stay.
Here’s a summary of the current Tier 2 (General) RCoS system and how businesses can adapt to this tougher immigration environment:
Tier 2 quotas
Where U.K. employers can show there is no suitable resident worker to fill a role, they may apply for an RCoS. The number of RCoS available nationally to all U.K. employers is capped at 20,700 per year. This overall quota is distributed unequally to provide greater availability for high-demand months and lower availability in other months. During the peak months of April through September, the Tier 2 quota is 2,200 per month; then, during October through February, it is lowered to 1,500 per month and in March it drops to 1,000.
Points system
Employer applications may be submitted up until the fifth of any month, and will be considered by the Home Office by the 11th of the month. Priority will be given to applications based on a points system which prioritizes shortage occupations, then certain Ph.D. level roles and then applies points on a sliding scale based on salaries, with lower salaries earning fewer points and higher salaries being awarded more points. Applications with the highest number of points are allocated first from the monthly pot. While the exact qualifying points are an unknown quantity each month, there is a clear trend of the qualifying salary level raising higher and higher, with roles offering lower salaries falling outside the quota. In April, the points threshold was approximately 46, and applicants, where their prospective employer has conducted a resident labor market test, had to meet a threshold salary of above £50,000, while in May the points threshold was 51 points, so roles paying less than £55,000 were rejected, effectively disqualifying hundreds of applications at the “low” end of the skilled worker pay range (despite otherwise being considered lucrative professional positions).
Refiling the next month
A large number of applications have been rejected over the past six months due to high demand and exacerbated by the logjam caused by unsuccessful applications being resubmitted the next month. The number of applications submitted has consistently been double the monthly quota allotment. Where an application is rejected, employers may refile the following month and each subsequent month. In the recent trend, a spillover effect means refiled applications quickly fill the available quotas for the next month, adding to the pressure. Refiling is only possible where the resident labor market test is still valid (typically within six months of the job advertisement being posted). This is less problematic for employers with rolling recruitment programs, but theoretically after five applications for an RCoS, an employer would have to start at the beginning and readvertise the role to confirm that no suitable resident worker is available. The points system arguably incentivizes companies to offer higher salaries to improve their chances of obtaining a Tier 2 RCoS, but salaries obviously must be within the advertised range and in line with company protocol to avoid any discrimination issues.
Planning ahead
The high demand in the Tier 2 category is likely to continue for several months, if not indefinitely. The trend began in December 2017 and carried into the new fiscal year as the higher quotas in April and May were not sufficient to account for the backlog from previous months. Multinational companies are likely to have felt the impact already, with employers who recruit less frequently being more likely to get caught by the increasingly restrictive quota.
Employers must learn to operate in this new environment by:
Alternative options
Not all migrants are subject to the RCoS quota. EEA nationals and their family members, individuals qualifying for dependent spousal visas, intracompany transferees with at least one year of experience within the corporate group (unless exemptions apply), Tier 2 high earners and Tier 4 students graduating in the U.K. all fall outside the cap. It is important that employers explore all alternative visas or exemptions from the cap and engage in strategic planning, such as ensuring that the Tier 5 temporary work and Tier 2 (ICT) options are used where possible to allow employees to start work while resubmitting their applications, and looking at temporary work locations in another overseas office while waiting for U.K. quota availability. Although employers and migrants value Tier 2 (General) status because it leads to permanent residence, this benefit must be weighed against the increasingly restricted quota system. It is also now imperative that a credible risk assessment based on salary is made before any resident labor market test is conducted and the role is advertised, and certainly before contingent offers are made, rather than expecting quota availability to improve. BAL has extensive experience in helping employers strategize and can advise on compliant solutions on a case-by-case basis.
This alert has been provided by the BAL Global Practice group in the United Kingdom. For additional information, please contact uk@bal.com.
Copyright © 2018 Berry Appleman & Leiden L LP. All rights reserved. Reprinting or digital redistribution to the public is permitted only with the express written permission of Berry Appleman & Leiden LLP. For inquiries please contact copyright@bal.com.
The new Home Secretary, Sajid Javid, has launched an immigration documentation scheme designed to provide redress to the thousands of “Windrush generation” Britons and their families, following the public scandal in which they were unfairly caught up in the government’s “hostile environment” policy for illegal migrants. Javid was appointed to replace Amber Rudd, who was forced to resign having “inadvertently misled” Parliament about the Home Office’s numerical targets for deportations and unfair treatment of these British citizens and residents due to lack of specific documentation.
As of May 30, the scheme allows the Windrush generation and other long-time undocumented residents to apply for documents confirming their British citizenship free of charge. The program applies to nationals of Commonwealth countries who settled in the U.K. before 1973, their children under 18 who have been continuously present in the U.K., and individuals whose settled status lapsed because of spending more than two years outside the U.K. In addition, individuals of any nationality who arrived between 1973 and 1988 who are lawfully settled in the U.K. are eligible to apply for documentation verifying their status as U.K. permanent residents. Successful applicants will be granted a status document, although not a British passport (which must be applied for separately and at a cost). A movement to compensate those who have been turned away from work or who have been unfairly denied housing or National Health Service support has led the government to open a call for evidence which ends June 8.
Further details on the eligibility criteria and the application process are available here.
Background: The “Windrush generation” were invited to Britain between 1948 and 1971 to fill labor shortages following World War II and were named after the first boat arriving from the Caribbean. At the time, these migrants were welcomed as Commonwealth (and, therefore, British) citizens and many children traveled undocumented on their parents’ passports. While these migrants went on to play an essential role in the rebuilding of post-war Britain and form the bedrock of BME (Black and Minority Ethnicity) British society, no documentation was issued proving their legal status, and landing records that document their arrival were destroyed by the Home Office in the 2010s. Fast forward 50 years and this lack of documentation has rendered it impossible for many migrants to fulfill right-to-work and right-to-rent checks by employers and landlords or to prove that they are entitled to health services, despite many being British citizens or entitled to naturalize. Immigration rules introduced in 2012 to make the U.K. a “hostile environment” for illegal migrants, where lack of documentation means lack of access to work, housing and services, have proved directly discriminatory to the Windrush descendants.
BAL Analysis: The Windrush scandal has captured the public’s attention and highlighted many unfair aspects of the Immigration Act that were previously below the radar, and may encourage the Home Office to temper the “hostile environment” toward migrants at the policy level more generally (and certainly if proposed compensation must be paid out to those denied work, housing or benefits). While the Windrush scandal does not directly affect business immigration into the U.K., all U.K. employers should be aware of the program when conducting mandatory right-to-work checks. Employers must be aware that there are legitimate grounds on which some British citizens or permanent residents many not hold passports, and be prepared to make further referrals to the Home Office Employer Checking service and seek advice on this scheme if necessary.
Copyright © 2018 Berry Appleman & Leiden LLP. All rights reserved. Reprinting or digital redistribution to the public is permitted only with the express written permission of Berry Appleman & Leiden LLP. For inquiries please contact copyright@bal.com.
IMPACT – HIGH
What is the change? For the sixth consecutive month, the allocated quota for Tier 2 Restricted Certificates of Sponsorship (RCoS) has been exhausted for May.
What does the change mean? Requests for Tier 2 (General) Certificates of Sponsorship with points below the minimum 51 and a salary of less than £55,000 per year are being rejected for the month of May, and employers will need to resubmit them in June.
Background: The annual quota for Tier 2 (General) visas is 20,700, allocated into monthly quotas. In 2016, the monthly distribution was changed to provide higher quotas during the high-demand months of April through September and lower quotas in other months, thereby shifting pressure on months at the end of the fiscal year (December through March). The exhaustion of quotas at the end of the fiscal year, however, has carried over into the new fiscal year. When the monthly quota is reached, applications are ranked by points obtained, with more points earned for shortage occupations, higher salaries, and certain Ph.D.-level roles.
BAL Analysis: As expected, the pressure on Tier 2 quotas continues and appears to be a long-term trend. The quotas have been exceeded every month since December 2017, and with the excess applications being rolled over to the next month, the pressure is unlikely to be eased anytime soon. BAL anticipates that quotas will be filled every month going forward, and certainly until September given the annual peak during the summer period. Companies that recruit higher earners will continue to be more likely to have their applications approved. Employers should consider salary as the deciding factor in the approval of an RCoS request and anticipate that all applicants on lower salaries will be delayed and potentially disqualified. While applications do roll over each month, this is only automatic while the advertising remains valid (typically six months). A more detailed risk assessment should be made for all roles prior to advertising.
What is the change? Prime Minister Theresa May has appointed Sajid Javid as Home Secretary following the resignation of Amber Rudd Sunday amidst a scandal revealing that the Home Office set quotas for removing undocumented immigrants.
What does the change mean? Javid, an MP for Bromsgrove, who previously served as business and culture secretaries, has criticized the deportation targets as well as the recent scandal involving the Windrush generation. His initial priority is to put the scandals to rest. Javid was opposed to Brexit and his appointment maintains the balance of Remainers and Brexiters within May’s Brexit Department.
Background: Rudd resigned Sunday after her former deputy said that they had discussed increasing deportations by 10 percent. The comments contradicted Rudd’s statements to parliament that she was not aware of the Home Office setting any numerical targets for deportations.
Javid said his first priority was “to keep the British people safe” and his most urgent task was to make sure the Windrush generation was treated “with the decency and fairness they deserve.” The Windrush generation refers to people from Commonwealth Caribbean countries who were invited to fill labor shortages and legally settle in post-WWII Britain, but were not given documentation. The government has come under fire for declaring them illegal immigrants, which has resulted in some being threatened with deportation, losing their jobs and being denied health care.
BAL Analysis: Javid’s immediate priority is to resolve the scandal and reassure the public that the Home Office is not promoting a “hostile environment” toward immigrants. In the longer term, Javid will oversee the new immigration policy post-Brexit. As a former Business Secretary, he is in favor of a skills-based immigration system, which is welcomed by the business community.
What is the change? The U.K. Department for Work and Pensions has announced that the ‘Universal Jobmatch’ recruitment site will soon be replaced by a new ‘Find a Job’ site.
What does the change mean? The Find a Job site will be launched on May 14 and the Jobmatch site will come offline June 17. Employers should be sure that they download and save any records that are currently saved on the Jobmatch site before the cutoff date.
BAL Analysis: Employers are advised to save all material currently retained on the Universal Jobmatch site, including material related to job advertisements. These records form compliance evidence of having completed the Resident Labour Market Test, and archived advertisements will not be available beyond June 17. Retaining the documents is part of a sponsor’s record keeping obligations and their failure to accurately record and retain them can negatively affect the sponsor license.
What is the change? The allocated quota for Tier 2 Restricted Certificates of Sponsorship (RCoS) has been exhausted for the month of April, the fifth consecutive month the quotas have been exhausted.
What does the change mean? Employers should anticipate that requests for Tier 2 (General) Certificates of Sponsorship with points below the minimum 46 and a salary of less than £50,000 per year have been refused and will need to be resubmitted in May.
BAL Analysis: As expected, Tier 2 quotas have been exhausted for the fifth month in a row, and BAL expects this trend to continue through May or June. Employers should plan accordingly and consider salary as the deciding factor in the approval of an RCoS request. Companies that recruit higher earners will continue to be more likely to have their applications approved.
The EU and U.K. have reached a provisional deal on a 21-month transition period to follow March 29, 2019 when the U.K. formally withdraws from the EU. The transition period is meant to avoid a cliff edge where European free movement rights are cut off overnight, and should give employers and individuals greater time to plan before any new U.K. immigration rules can come into force. However, the transition agreement cannot take effect until the wider EU-U.K. Withdrawal Agreement is finalized, which still faces considerable challenges.
The Migration Advisory Committee’s (MAC) interim report, published March 27, 2018, makes clear that while U.K. business responses are being considered, employers must wait until September 2018 for the MAC’s recommendations on the future of EEA migration into the U.K. and for greater insight into the legal position post-2020.
The transition agreement clarifies that the length of the transition will be 21 months— from March 30, 2019 until December 31, 2020—and that during this period, EU citizens in the U.K. (and U.K. citizens in the EU) will continue to enjoy free movement on the same pre-Brexit terms. This means that EEA nationals and their family members (including third-country national family members) can continue to travel to and enter the U.K. without a visa, and can start working in the U.K., or indeed continue to work, without needing to obtain Tier 2 work permission. EEA nationals will likely be subject to light-touch registration procedures from Brexit Day forward, but can be reassured of their continued right to work until the end of 2020. At the end of the transition period, new U.K. immigration rules will come into force to accommodate third-country nationals and EEA nationals as part of a unified single U.K. legal system.
While BAL does not have any indication of the shape and basis for this future immigration regime, the MAC—tasked by the government in July 2017 to research the impact of EEA migration on the U.K. labor market and recommend future migration policy—has issued an interim report showing a heterogeneous response from U.K. businesses. U.K. employers have collectively voiced the business need for EEA migration to fill skills shortages and resolve recruitment issues in the U.K., indicated the negative impact that migration restrictions would have on the U.K. economy, and asserted that the current Tier 2 regime is not a suitable basis for future migration into low-, medium-, as well as high-skilled areas.
Employers must wait until September 2018 for the MAC’s recommendations on the future of EEA migration into the U.K. and for greater insight into the immigration system post-2020. However, the MAC has clarified that its measure of successful migration policy is one that leads to the highest quality of life for the resident population—and that it will carefully consider the balance of impacts rather than treating business requirements or a successful economy as the only means to that end. The MAC believes that employers should be prepared to compete for labor and invest in short- and long-term training, productivity innovations, and in wage increases to meet recruitment needs rather than rely on a migration-based business model.
The key provisions of the draft agreement on a post-Brexit transition arrangement, published March 19, are as follows:
Length of Transition The U.K. will officially leave the EU on March 29, 2019. A transition period will last 21 months—March 30, 2019 through Dec. 31, 2020—to allow businesses and individuals time to prepare for new rules. The U.K. had asked for a longer transition period, but the transition agreement adopts the EU’s proposed time period.
Citizens’ rights EEA nationals and their family members arriving in the U.K. (and U.K. citizens arriving in an EEA country) during the transition period, i.e. through 2020, will enjoy the same rights to free movement and eligibility for residency that they currently enjoy. These citizens will be eligible for permanent residency after five years of continuous residency in the host state, counting periods of legal residence or work both before and after the end of the transition period. Permanent residency may be lost through absence only if the absence exceeds five consecutive years.
Irish nationals The close political relationship between Ireland and the U.K. predates the European Union. Irish nationals have automatic settled status in the U.K. which does not derive from EU law and therefore is unaffected by Brexit or the transitional period. Irish and U.K. citizens will retain full mobility and residency privileges in their respective countries under the Common Travel Area (CTA), and Irish citizens will not be required to register under any post-Brexit U.K. immigration system. The CTA arrangement allows Irish nationals to enter the U.K., work and reside on the basis of their passport alone and without obtaining any further immigration permission.
Residency documents The U.K. may require that EEA nationals and their family members apply for a new residence status through “simple, transparent and user-friendly administrative procedures.” This means we can realistically expect some form of residence card regime to be introduced, likely based on the current non-mandatory EEA registration regime. The deadline for applying for any such status will be no less than six months after the transition period for those arriving in the U.K. before the end of the transition (or three months from the date of arrival for others, whichever is longer). Those who hold a valid permanent residence document before the end of the transition period will be able to exchange that document for a new residency document free of charge upon verifying their identity and undergoing a security check.
Ireland and Northern Ireland One of the key obstacles to the U.K. Withdrawal Agreement is the Irish border issue. Northern Ireland is a part of the United Kingdom, but shares a 500 km land border with the Republic of Ireland, which will remain a member of the European Union and subject to EU regulations. A hard border between Northern Ireland and the Republic would not necessarily affect the free movement of people as right-to-work checks are performed by the employer and not by border officials, but the movement of goods across the border and customs arrangements are problematic. The political sensitivities are particularly acute in a region that has only recently emerged from years of violent unrest under a hard-won peace accord. While the matter continues to be negotiated, under the transition agreement, the fallback position—unless another arrangement is reached—is that Northern Ireland will continue to follow EU regulations in order to avoid incongruent rules and a hard border between Northern Ireland and the Republic of Ireland.
With Brexit Day just one year away, the EU and U.K. have mostly resolved the issue of citizens’ rights, although the overall negotiations continue to create problems. Significantly, the U.K. government has agreed that EEA nationals will retain their mobility and residency rights until the end of the transition period on December 31, 2020, instead of Brexit Day. This important concession provides EEA nationals and their employers approximately two additional years of free movement to carry on “business as usual.”
Any planning for the legal regime post-2020 remains difficult, as the framework has yet to be designed and published. September 2018 should bring further guidance from the MAC on how best to project future requirements.
Companies are encouraged to work with their BAL professionals to prepare appropriate strategies for EEA employees. BAL continues to recommend that companies keep close track of their European workforce, and that EEA nationals in the U.K. apply for residency now, as they will be eligible for a streamlined process to exchange current permanent residency document for a new residency document after the end of the transition period.
Should you have any questions or require more information on how BAL can help with Brexit planning, please contact us at uk@bal.com.
The Migration Advisory Committee has published an interim report on the progress of its research into current and future EEA migration and its impact on the United Kingdom. The report summarizes written responses from 417 businesses, organizations and individuals to its call for evidence—a record number of responses to a MAC project—which will form part of the evidence base for the committee’s recommendations on the U.K.’s immigration system when any Brexit transition period ends (expected 2021). The MAC divided its report into two broad categories: (1) employer responses regarding employment of EEA workers, and (2) regional government responses on the impact of EEA migrants on population and demographic issues. The key points arising out of the employer responses on business immigration are summarized below.
Key points:
The full interim report can be viewed here.
BAL Analysis: The interim report does not make recommendations on EEA migration or a future U.K. immigration system—those will be left for the final report, which is due in September – and the MAC warns against jumping to premature conclusions. However, the report demonstrates that the MAC has received certain key messages from U.K. employers: that restrictions on EEA migration would have a negative impact on business and the U.K. economy across a broad range of sectors; that retained access to low-, medium- and high-skilled EEA labor is necessary; and that the current Tier 2 is too restrictive. In turn, the MAC has made clear that it considers that the best migration policy is that which delivers the highest quality of life for U.K. residents and that a thriving economy is only one means to this end. Employer responses and business demands will not be taken at face value and will be weighed against other impacts. In particular, the MAC has been robust in suggesting that employers (particularly those relying on lower-skilled migration) should expect to invest funds in both short- and long-term training, technology and other productivity innovations, and pay higher wages in order to attract and retain workers in a future competitive jobs market.
What is the change? The allocated quota for Tier 2 Restricted Certificates of Sponsorship (RCoS) has been exhausted for the month of March, the fourth consecutive month the quotas have been exhausted.
What does the change mean? Employers should anticipate that requests for Tier 2 (General) Certificates of Sponsorship with points below the minimum 50 and a salary of less than £55,000 per year have been refused and will need to be resubmitted in April.
Background: The annual quota for Tier 2 (General) visas is 20,700, allocated into monthly quotas. In 2016, the monthly distribution was changed to provide higher quotas during the high-demand months of April through September and lower quotas in other months, thereby shifting pressure on months at the end of the fiscal year (December through March). When the monthly quota is reached, applications are ranked by points obtained, with more points earned for shortage occupations, higher salaries, and certain Ph.D.-level roles.
BAL Analysis: BAL anticipates pressure on quotas through May or June and recommends that employers plan accordingly. While the government considers whether to make changes to its shortage occupation list to alleviate pressure on the quotas, employers should consider salary as the deciding factor in the approval of an RCoS request. Companies that recruit higher earners will continue to be more likely to have their applications approved.
The EU and U.K. have reached a provisional deal on the transition period that will follow March 29, 2019 when the U.K. formally withdraws from the EU. The transition period is meant to give businesses time to plan before new immigration and trade rules take effect.
Key provisions:
Background: Negotiators have been wrangling over the terms of the transition for the past month, and the deal reached reflects that the EU won concessions from the U.K. on nearly all of the terms it sought.
EU negotiator Michel Barnier said the deal marked “a decisive step,” while U.K. negotiator David Davis said it would allow businesses the ability to “plan for the future with confidence.”
BAL Analysis: While the terms of the transition deal are clearer, particularly regarding citizens’ rights and the length of the transition period, the overall withdrawal deal is still uncertain until it is ratified, which is likely to be in 2019. Companies should plan for EU employees in the U.K. (and U.K. employees in the EU) to retain their free movement rights through 2020, but are encouraged to pursue residency documents when eligible. Further changes are likely to occur as both the U.K. and the EU negotiate the terms of Brexit.